Page 654 - Introduction to Business

628 PART 6 Managing Business Operations, Management Information Systems, and the Digital Enterprise

backward vertical integration A form of vertical integration was backward. If DaimlerChrysler decided to acquire all of its
vertical integration where the supply car dealers, which are “downstream” in the supply chain from DaimlerChrysler,
chain member that develops the ability then it would be said that its vertical integration was forward.
to perform the function that another
supply chain member has been Virtual collaboration is a supply chain management strategy where companies
performing is “downstream” from that form a supply chain to provide goods or services on demand. The apparel business
supply chain member
provides a traditional example of virtual collaboration. The designers of clothes sel-
forward vertical integration A form of dom manufacture their designs; rather, they license the manufacture. In turn, the
vertical integration where the supply
chain member that develops the ability manufacturer may rent a loft, lease sewing machines, and contract for labor. The
to perform the function that another result is a supply chain that has low overhead, remains flexible, and can respond
supply chain member has been rapidly to market. A contemporary case of virtual collaboration is the semiconduc-
performing is “upstream’’ from that
supply chain member tor industry, exemplified by Visioneer in Palo Alto, California. This firm subcon-
tracts almost everything: Software is written by several partners, hardware is man-
virtual collaboration A supply chain
management strategy where companies ufactured by a subcontractor in Silicon Valley, printed circuit boards are made in
form a supply chain to provide goods or Singapore, and plastic cases are made in Boston, where units are also tested and
services on demand
packaged for shipment.
bypassing A supply chain management Bypassing is a supply chain management strategy where one member of the
strategy where one member of the supply chain eliminates the functions performed by another member. Dell pro-
supply chain eliminates the functions vides the best example of bypassing with its direct sales to customers model. In this
performed by another member of the
chain case, distributors and retailers are bypassed by the manufacturer. The Dell supply
chain has only three stages: suppliers, manufacturer, and customers, as shown in
Exhibit 18.6.
EXHIBIT 18.6 Because Dell is in direct contact with its customers, it has been able to finely
segment them and analyze the needs and profitability of each segment. Close con-
The Dell Supply Chain
tact with its customers and an understanding of
customers’ needs also allows Dell to develop
Supplier Customer better demand forecasts. To further improve the
match between supply and demand, Dell
makes an active effort to steer customers in real
Supplier Manufacturer Customer time, on the phone or via the Internet, toward
PC configurations than can be built given the
components available. Dell was established in
1984, and by 1998 it had grown into a $12 billion
Supplier Customer
U.S. dollars company. Since 1993, Dell has
experienced earnings growth of more than 65
percent per year. Its earnings growth is antici-
pated to be more than 30 percent per year over the next five years. Dell has attrib-
uted a significant part of its success to superb supply chain management and its
direct sales to customers model.

reality How does supply chain management affect you as a consumer?
CH ECK

E-Business

LEARNING OBJECTIVE 7
Outline the roles that ERP systems, supply chain management, and e-business
play in the emergence of the digital enterprise.

e-business The process of buying and E-business is the process of buying and selling goods and services electronically. E-
selling goods and services business involves transactions that use networks, the Internet, and other digital
electronically
technologies. If ERP systems provide the links among the different business func-
tions in a business organization, and supply chain management provides the links

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